Does Your Tax ID Number Need to be Renewed?

Does Your Tax ID Number Need to be Renewed?

According to the Internal Revenue Service (IRS), just about 2 million Individual Taxpayer Identification Numbers (ITINs) are set to expire at the end of 2019.

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Facing a Huge Gain from a Realty Sale?

Facing a Huge Gain from a Realty Sale?

If you are contemplating selling real estate property, there are a number of issues that could impact the taxes that you might owe, and there are steps you can take to minimize the gain, defer the gain, or spread it over a number of years.

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How to File Taxes After Saying “I Do”

How to File Taxes After Saying “I Do”

A taxpayer’s filing status for the year is based upon his or her marital status at the close of the tax year. Thus, if you get married on the last day of the tax year, you are treated as married for the entire year. The options for married couples are to file jointly or separately. Both statuses can result in surprises – some pleasant and some unpleasant – for individuals who previously filed as unmarried.

Individuals filing jointly must combine their incomes, and if both spouses are working, combining income can trigger a number of unpleasant surprises, as many tax benefits are eliminated or reduced for higher-income taxpayers. The following are some of the more frequently encountered issues created by higher incomes:

  • Being pushed into a higher tax bracket
  • Causing capital gains to be taxed at higher rates
  • Reducing the child care credit
  • Limiting the deductible IRA amount
  • Triggering a tax on net investment income that only applies to higher-income
    taxpayers
  • Causing Social Security income to be taxed
  • Reducing the Earned Income Tax Credit
  • Reducing or eliminating medical deductions

Filing separately generally will not alleviate the aforementioned issues because the tax code includes provisions to prevent married taxpayers from circumventing the loss of tax benefits that apply to jointly filing higher-income taxpayers by filing separately.

On the other hand, if only one spouse has income, filing jointly will generally result in a lower tax because of the lower joint tax brackets and a higher standard deduction, double the amount for single individuals ($24,400 for 2019), if the couple does not itemize deductions. In addition, some of the higher-income limitations that might have applied to an unmarried individual with the same amount of income may be reduced or eliminated on a joint return.

Filing as married but separate will generally result in a higher combined income tax for married taxpayers. For instance, if a couple files separately, the tax code requires both to itemize their deductions if either does so, meaning that if one itemizes, the other cannot take the standard deduction. Another example relates to how a married couple’s Social Security (SS) benefits are taxed: on a joint return, none of the SS income is taxed until half of the SS benefits plus other income exceeds $32,000. On a married-but-separate return, and where the spouses have lived together at any time during the year, the taxable threshold is reduced to zero.

Aside from the amount of tax, another consideration that married couples need to be aware of when deciding on their filing status is that when married taxpayers file jointly, they become jointly and individually responsible (often referred to as “jointly and severally liable”) for the tax and interest or penalty due on their returns. This is true even if they later divorce. When using the married-but-separate filing status, each spouse is only responsible for his or her own tax liability.

Once a couple files as married filing jointly they cannot undo that. However, if they file separately, they can later amend that filing status to married filing jointly. Once the knot is tied, the Social Security Administration should be notified of any name changes, and if they’ve moved, the IRS needs to be notified of the couple’s new address.

If either or both of the newlyweds purchased their health insurance through a government marketplace, the marketplace should be advised of the couple’s marriage so that any advance premium tax credit (APTC) being applied to pay the insurance premiums can be adjusted when necessary. Doing so could prevent having to repay some or all of the APTC when filing their federal return(s) for the year of the marriage.

Of course the couple needs to notify their employers of their new marital status so any affected benefits can be updated. Usually new W-4 forms should be prepared and given to their employers so income tax withholding can be revised for the new filing status.

Other issues that may come into play and should be considered are:

  • If one of the spouses has an outstanding liability with the IRS or state taxing
    authority, that situation could jeopardize any future refund on a jointly filed
    return.
  • It may be appropriate not to commingle income from assets a spouse wants
    to maintain as separate property or where the spouses want to name
    separate beneficiaries.
  • Individuals marrying later in life may wish to keep their incomes separate or
    only pay the tax on their own income.

If you have questions or would like an appointment to evaluate the impact of marriage on your tax liability before saying “I do,” please give this office a call.


Isler Northwest LLC is a firm of certified public accountants and business advisors based in Portland, Oregon. Our local, regional, and global resources, our expertise, and our emphasis on innovative solutions and continuity create value for our clients. Our service goals at Isler Northwest is to earn our clients trust as their primary business and financial advisors.

Isler Northwest

(503) 224-5321

1300 SW 5th Avenue
Suite 2900
Portland, Oregon 97201

July 2019 Individual Due Dates

July 2019 Individual Due Dates

July 1 – Time for a Mid-Year Tax Check Up

Time to review your 2019 year-to-date income and expenses to ensure estimated tax payments and withholding are adequate to avoid underpayment penalties.

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States’ SALT Deduction Workarounds Shot Down

States’ SALT Deduction Workarounds Shot Down

The Treasury Department and the IRS have essentially shot down efforts by several states to help their residents circumvent the $10,000 cap on the itemized deduction for state and local taxes (SALT).

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How Does Combining a Vacation with a Foreign Business Trip Affect the Tax Deduction for Travel Expenses of a Self-Employed Individual?

How Does Combining a Vacation with a Foreign Business Trip Affect the Tax Deduction for Travel Expenses of a Self-Employed Individual?

Note: effective for years 2018 through 2025, the Tax Cuts and Jobs Act of 2017 suspended the deduction of miscellaneous itemized expenses that must be reduced by 2% of the taxpayer’s adjusted gross income. Employee business expenses, including travel expenses, fall into this category. Therefore, this discussion only applies to self-employed individuals for years 2018-2025.

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Why Tax Basis Is So Important

Why Tax Basis Is So Important

For tax purposes, the term “basis” refers to the original monetary value that is used to measure a gain or loss. For instance, if you purchase shares of a stock for $1,000, your basis in that stock is $1,000; if you then sell those shares for $3,000, the gain is calculated based on the difference between the sales price and the basis: $3,000 – $1,000 = $2,000. This is a simplified example, of course—under actual circumstances, purchase and sale costs are added to the basis of the stock—but it gives an introduction to the concept of tax basis.

The basis of an asset is very important because it is used to calculate deductions for depreciation, casualties, and depletion, as well as gains or losses on the disposition of that asset.

The basis is not always equal to the original purchase cost. It is determined in a different way for purchases, gifts, and inheritances. In addition, the basis is not a fixed value, as it can increase as a result of improvements or decrease as a result of business depreciation or casualty losses. This article explores how the basis is determined in various circumstances.

Cost Basis – The cost basis (or unadjusted basis) is the amount originally paid for an item before any improvements and before any business depreciation, expensing, or adjustments as a result of a casualty loss.

Adjusted Basis – The adjusted basis starts with the original cost basis (or gift or inherited basis), then incorporates the following adjustments:

  • increases for any improvements (not including repairs),
  • reductions for any claimed business depreciation or expensing deductions, and
  • reductions for any claimed personal or business casualty-loss deductions.

Example: You purchased a home for $250,000, which is the cost basis. You added a room for $50,000 and a solar electric system for $25,000, then replaced the old windows with energy-efficient double-paned windows at a cost of $36,000. The adjusted basis is thus $250,000 + $50,000 + $25,000 + $36,000 = $361,000. Your payments for repairs and repainting, however, are maintenance expenses; they are not tax deductible and do not add to the basis.

Example: As the owner of a welding company, you purchased a portable trailer-mounted welder and generator for $6,000. After owning it for 3 years, you then decide to sell it and buy a larger one. During this period, you used it in your business and deducted $3,376 in related deprecation on your tax returns. Thus, the adjusted basis of the welder is $6,000 – $3,376 = $2,624.

Keeping records regarding improvements is extremely important, but this task is sometimes overlooked, especially for home improvements. Generally, you need to keep the records of all improvements for 3 years (and perhaps longer, depending on your state’s rules) after you have filed the return on which you report the disposition of the asset.

Gift Basis – If you receive a gift, you assume the doner’s adjusted basis for that asset; in effect, the doner transfers any taxable gain from the sale of the asset to you.

Example: Your mother gives you stock shares that have a market value of $15,000 at the time of the gift. However, your mother originally purchased the shares for $5,000. You assume your mother’s basis of $5,000; if you then immediately sell the shares, your taxable gain is $15,000 – $5,000 = $10,000.

There is one significant catch: If the fair market value (FMV) of the gift is less than the doner’s adjusted basis, and if you then sell it for a loss, your basis for determining the loss is the gift’s FMV on the date of the gift.

Example: Again, say that your mother purchased stock shares for $5,000. However, this time, the shares were worth $4,000 when she gave them to you, and you subsequently sold them for $3,000. In this case, your tax-deductible loss is only $1,000 (the sales price of $3,000 minus the $4,000 FMV on the date of the gift), not $2,000 ($3,000 minus your mother’s $5,000 basis).

Inherited Basis – Generally, a beneficiary who inherits an asset uses its FMV on the date when the owner died as the tax basis. This is because the tax on the decedent’s estate is based on the FMV of the decedent’s assets at the time of death. Normally, inherited assets receive a step up (increased) in basis. However, if an asset’s FMV is less than the decedent’s basis, then the beneficiary’s basis is stepped down (reduced).

Example: You inherit your uncle’s home after he dies. Your uncle’s adjusted basis in the home was $50,000, but he purchased the home 25 years ago, and its FMV is now $400,000. Your basis in the home is equal to its FMV: $400,000.

Example: You inherit your uncle’s car after he dies. Your uncle’s adjusted basis in the car was $50,000, but he purchased the car 5 years ago, and its FMV is now $20,000. Your basis in the car is equal to its FMV: $20,000.

An inherited asset’s FMV is very important because it is used when determining the gain or loss after the sale of that asset. If an estate’s executor is unable to provide FMV information, the beneficiary should obtain the necessary appraisals. Generally, if you sell an inherited item in an arm’s-length transaction within a short time, the sales price can be used as the FMV. A simple example of not at arm’s length is the sale of a home from parents to children. The parents might wish to sell the property to their children at a price below market value, but such a transaction might later be classified by a court as a gift rather than a bona fide sale, which could have tax and other legal consequences.

For vehicles, online valuation tools such as Kelly Blue Book can be used to determine FMV. The value of publicly traded stocks can similarly be determined using Website tools. On the other hand, for real estate and businesses, valuations generally require the use of certified appraisal services.

The foregoing is only a general overview of how basis applies to taxes. If you have any questions, please call this office for help.


Isler Northwest LLC is a firm of certified public accountants and business advisors based in Portland, Oregon. Our local, regional, and global resources, our expertise, and our emphasis on innovative solutions and continuity create value for our clients. Our service goals at Isler Northwest is to earn our clients trust as their primary business and financial advisors.

Isler Northwest

(503) 224-5321

1300 SW 5th Avenue
Suite 2900
Portland, Oregon 97201

The Tax Benefits of Going Green

The Tax Benefits of Going Green

Congress uses tax deductions and tax credits to influence taxpayers’ actions. For instance, it seeks to stimulate taxpayers to reduce their energy consumption and moving away from the use of fossil fuels. In this article, we explore the benefits and drawbacks of two major incentives: the home-solar credit and the electric-vehicle credit.

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Gift and Estate Tax Primer

Gift and Estate Tax Primer

The tax code places limits on the amounts that individuals can gift to others (as money or property) without paying taxes. This is meant to keep individuals from using gifts to avoid the estate tax that is imposed upon inherited assets. This can be a significant issue for family-operated businesses when the business owner dies; such businesses often have to be sold to pay the resulting inheritance (estate) taxes. This is, in large part, why high-net-worth individuals invest in estate planning.

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May 2019 Due Dates

May 2019 Individual Due Dates

May 10 – Report Tips to Employer

If you are an employee who works for tips and received more than $20 in tips during April, you are required to report them to your employer on IRS Form 4070 no later than May 10. Your employer is required to withhold FICA taxes and income tax withholding for these tips from your regular wages. If your regular wages are insufficient to cover the FICA and tax withholding, the employer will report the amount of the uncollected withholding in box 12 of your W-2 for the year. You will be required to pay the uncollected withholding when your return for the year is filed.

May 31 –  Final Due Date for IRA Trustees to Issue Form 5498

Final due date for IRA trustees to issue Form 5498, providing IRA owners with the fair market value (FMV) of their IRA accounts as of December 31, 2018. The FMV of an IRA on the last day of the prior year (Dec 31, 2018) is used to determine the required minimum distribution (RMD) that must be taken from the IRA if you are age 70½ or older during 2019. If you are age 70½ or older during 2019 and need assistance determining your RMD for the year, please give this office a call. Otherwise, no other action is required and the Form 5498 can be filed away with your other tax documents for the year.

May 2019 Business Due Dates

May 10 – Social Security, Medicare and Withheld Income Tax

File Form 941 for the first quarter of 2019. This due date applies only if you deposited the tax for the quarter in full and on time.

May 15 – Employer’s Monthly Deposit Due

If you are an employer and the monthly deposit rules apply, May 15 is the due date for you to make your deposit of Social Security, Medicare and withheld income tax for April 2019. This is also the due date for the non-payroll withholding deposit for April 2019 if the monthly deposit rule applies.


Isler Northwest LLC is a firm of certified public accountants and business advisors based in Portland, Oregon. Our local, regional, and global resources, our expertise, and our emphasis on innovative solutions and continuity create value for our clients. Our service goals at Isler Northwest is to earn our clients trust as their primary business and financial advisors.

Isler Northwest

(503) 224-5321

1300 SW 5th Avenue
Suite 2900
Portland, Oregon 97201